Optimizing for Change: Why Exuberance is Required
Don't be a Party Pooper
Optimizing for Change: Why Exuberance is Required
This week there is a lot of focus on the spending associated with AI. OpenAi and Oracle inking a $300 billion deal and ASML in Europe investing well over $1 billlion in Mistral are drivers of the conversation. Exuberance and Bubble are being used a lot in link seeking headlines.
But these are contentless labels ignoring the possibility that what we are seeing is not exuberance but rational investment in a humanity transforming technology. The underlying cause of the negativity is simply disbelief, not intellect. Fear masquerading as thought.
What looks like excess is, in fact, urgency. A $300B OpenAI-Oracle data center pact, $115B of projected OpenAI spend through 2029, and a $100B shift of ownership to OpenAI's nonprofit aren't vanity metrics; they're the scaffolding of a new civic utility. Pair that with ASML's €1.3-1.5B bet on Mistral and SpaceX's $17B spectrum deal for direct‑to‑phone connectivity from space, and the signal is unmistakable: we're industrializing intelligence, not just iterating software.
Investment is not an option, it is a necessity if the human impact of AI is to be realized. The measure of that is in answering the question of AI's impact on the Gross Domestic Product of the world. Today global GDP is about $108 trillion annually. Most sanguine forecasters suggest the minimum return on investment from AI will be to add $20 trillion to global GDP by 2035. Others go way higher, suggesting a doubling of GDP. AI is already 2-3% of global GDP and we are only in year 2 of real revenue production.
OpenAI and Anthropic are leading hte charge here, and are able to garner large amounts of capital due to the potential outcomes.
Does this mean that the current valuations will survive and grow? There is no way to know, because valuations are driven by future looking models and current sentiment about them. But will value be created far above the investments we are seeing, absolutely yes.
Jon Callaghan of True Ventures staets this plainly in his essay about Capex:
Instead of thinking "this time is different", I'd rather assume that "this time things will be approximately the same" in terms of how we estimate the scale of value to be created, especially the relationship of early capex spending to application layer buildout and value.
The waves of innovation in these past 3 decades have "rhymed" (or to update this analogy, "looped") in terms of certain patterns, one of which I think of as the "Capex Multiplier." Web 1.0, Web 2.0, Cloud/SaaS, and Mobile have all shown a consistent pattern of early capex foundation investment followed by the creation of tremendous value over time at the application layer. How much value? About 5x-10x the initial infrastructure investment.
In the case of AI the multiplier is likely to be far higher because of the prize, global access to human knowledge and the ability to act on it, delivered for almost free to most humans.
Again Jon:
We're squarely in the AI capex buildout now, with most estimates converging around $2 trillion in AI infrastructure spending over this five- year period. Just last week, Jensen upped his prediction of AI capex to $3 trillion to $4 trillion over the next 5 years, and McKinsey & Co puts the number at $7 trillion by 2030.
Applying a 5-7x Capex Multiplier to these numbers yields a staggering approximation of $15 trillion to $30 trillion in net new value to be created at the application layer over the next couple of decades, or less. (Some waves have been faster than others).
This week's essay about Yamanaka Factors is a good case study in potential. By studying proteins scientists have reversed aging in mice. Rebuilt decaying cells. Extended life. The belief is that this will be usable with humans. The economic consequences are unmeasurable.
Another case, SpaceX buying Echostar's space delivered spectrum so it can deliver global high bandwidth internet to the entire planet. A $17 billion bet for a far higher payout.
Finally Apple's new Air Pods Pro 3 - delivering real time translation between speakers of 2 different languages, leveraging models that run on an iPhone, and the noise cancellation feature of the iPods. This is the Star Trek 'universal translator' but hundreds of years early.
What does this mean? Investment and spending numbers have to be measured against outcomes. There is no bubble or exuberance if the outcomes dwarf the costs. Tming? Well it can take decades of course, and there can be ups and downs along the journey. But with AI I would bet on a far shorter payback due to the speed of innovation and the breadth of applications.
Just like the Air Pods Pro 3, AI is going to be built into everything and will improve human life. Is there any price too high to pay for the gains that will produce?
Our stance is unambiguous: lean in. The week's stories show the costs are high because the prize is human - faster care (biotech and Yamanaka‑era rejuvenation pipelines), wider opportunity (creators, investors, students), stronger institutions (augmentation over automation). Exuberance is justified when paired with clear guardrails and measurable outcomes. Build the capacity. Codify the rights. Then let the work compound.
Essay
🚨 Elon Musk: "The actions of the West are indistinguishable from suicide."
Youtube • All-In Podcast • September 9, 2025
GeoPolitics•USA•Elon Musk•Essay•Western Civilization